Superannuation to increase 1st July 2022
On the 1st of July 2022 the superannuation guarantee (SG) will increase from 10% to 10.5%. It will continue to increase by 0.5% on the 1st of July each year until it reaches 12% on the 1st of July 2025.
Employers must increase the minimum superannuation contribution to eligible employee’s ordinary time earnings to 10.5% otherwise they can face significant charges and penalties imposed by the ATO for underpaid superannuation.
Employers will need to prepare and plan for the increasing employee costs for the next financial year & future financial years when reviewing their own budget. Some things to consider:
- Review employee agreements to determine if remunerations are inclusive or exclusive of superannuation
- Notify your employees of the superannuation increase – especially if the changes will impact their take home pay
- Ensure payroll software is updated to incorporate the rate change
Depending on the terms of employment, it could result in an employee’s take home pay decreasing or the employer’s cost increasing:
- An employee’s annualised salary is inclusive of superannuation – The employee’s wage includes superannuation which means their take home pay will decrease on the 1st of July 2022.
- An employee’s annualised salary is exclusive of superannuation – The employee’s take home pay will remain unchanged & the employer will bear the costs of the increase.
Employees covered by a modern award are exclusive of superannuation, which means their take home pay will remain the same & the employer will incur the cost of the superannuation increase of 0.5%.
Some employees may already be receiving more than the minimum SG due to an agreed term under an employment agreement so the increase may not affect them, it depends on the wording of their contract. Employers need to review their employment agreements to determine if an employee’s superannuation rate must increase.